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The Chorus conundrum

Paul Brislen, Editor. 10 November 2020, 7:31 am

Chorus, the country's largest network provider, is in something of a bind.

At a presentation to the finance sector earlier this month, the company outlined a rosy future with constant growth in demand and an expectation that home users will be consuming more than 1000GB (a terabyte) of data every month - more than double our current levels, which sit around the 450GB/month mark, and a huge leap up from the pre-fibre days where a 1GB/month connection was seen as an extravagance by certain technology newspaper editors at the time.

But alongside such huge demand for services, Chorus is also warning that competition from 5G fixed-wireless services and regulatory settings that might push too far in favour of retail service providers such as Vodafone, Spark, the Vocus Group and 2Degrees (among others) might mean future investors be robbed of any earnings by an unjust world.

Indeed, at its recent AGM, the company warned that the Commerce Commission might not take into account the risk the company bore in setting up the Ultra Fast Broadband network in the first place.

This seems to be quite a re-writing of history because the UFB project, begun by then minister of communications Stephen Joyce in 2010, set the regulatory thresholds required for telcos to take part and Telecom was invited to join in or face being overbuilt by a new and vastly superior network that would be underwritten by the government. Any risk was borne by the country, not by the newly minted Local Fibre Companies (LFCs) who had a steady stream of cheap capital coming their way and who would at the end of the project be given complete ownership of a 21st century network that requires very little ongoing maintenance when compared with the old copper network and an opportunity to make money for the rest of the 2000s and probably beyond as well.

Chorus did famously complain about regulation being too harsh at least once in the past during the Copper Tax battle in 2013. A number of consumer and tech groups (including ITP) called for government to support the regulator in the review of pricing that followed the separation of Telecom into two halves (later Chorus and Spark) - one a network operator and the other a retail provider of services. The Telecommunications Amendment Act 2010 had allowed a three-year buffer before the introduction of "cost-based" pricing for regulating the Chorus monopoly but by the time it was introduced Chorus had decided it would be too great a price to bear and called for an extra handout from government. It did not succeed.

Today, the UFB is a raging success, and any talk of risk should well be behind us. Chorus's share price has bounced back from a low of $1.32 in 2012 to $8.95 today giving it a market capitlisation of around $3.77 billion, and the conversation has turned to making sure the rest of New Zealand not yet served by fibre connectivity isn't left behind in this race to a broadband future. But the ghost of regulations past still seem to haunt the company.


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